On December 12, 2023, the Supreme People’s Court publicly solicited comments on the “Interpretation of the Supreme People’s Court on Issues Concerning the Application of Law in the Trial of Labor Dispute Cases (II) (Draft for Comments)” (hereinafter referred to as the “Draft for Comments”). After studying the Draft, Attorney Zheng Zhongkang of Long An (Guangzhou) Law Firm, combining his systematic understanding of current labor laws and practical experience in labor legal services, proposed seven revision suggestions regarding the Draft. Relevant feedback has been formally submitted to the Supreme People’s Court through designated channels.

Attorney Zheng Zhongkang’s specific revision suggestions and rationale for the Draft are as follows:

I. Equity incentive targets are objectively difficult to characterize as labor remuneration. Article 1 of the Draft, failing to fully consider the various forms of current equity incentives, risks ambiguous scope of application. It is recommended to revise the wording of this article to reduce semantic ambiguity and application obstacles.

Original text:

I. [Acceptance of Equity Incentive Disputes] Where an employer, based on an employment relationship, distributes labor remuneration to workers through equity incentives, disputes arising from workers requesting the employer to deliver equity incentive targets or compensate for equity incentive losses shall be deemed labor disputes, except for disputes arising from the exercise of equity rights. Where a party refuses to accept an award by a labor dispute arbitration institution and initiates litigation according to law, the people’s court shall accept the case.

Revision suggestion:

I. [Acceptance of Equity Incentive Disputes]

Where an employer and a worker agree to allocate the employer’s own equity to the worker as an incentive, disputes arising from the worker requesting the employer to deliver equity incentive targets or compensate for equity incentive losses according to the agreement shall be deemed labor disputes, except for disputes arising from the exercise of shareholder rights by the worker after obtaining the incentive target equity. Where a party refuses to accept an award by a labor dispute arbitration institution and initiates litigation according to law, the people’s court shall accept the case.

Reasons for revision:

I. Equity incentive targets distributed by employers to workers lack the legal systemic and practical basis to be recognized as wages. The qualifying condition “employer distributes labor remuneration to workers through equity incentives based on an employment relationship” may cause this article to lose its scope of application entirely.

1. Differences in characteristics between equity incentive income and labor remuneration: Pursuant to Article 4 of the “Provisions on the Composition of Total Wages” (National Bureau of Statistics Order No. 1), total wages consist of six components: time-rate wages, piece-rate wages, bonuses, subsidies and allowances, overtime wages, and wages paid under special circumstances. In current social practice, employee equity incentives in companies are mainly achieved through agreements between employers and workers, conditionally granting workers certain equity-based (or virtual equity, indirect equity) and related property interests. The amount of such income is not fixed, lacks a regular distribution cycle, and is often subject to vesting conditions, showing significant differences from the components described in Article 4 of the above Provisions.

2. Differences in nature between equity incentive income and labor remuneration: Property interests from equity incentives can generally only be realized upon meeting specific conditions as agreed. The essence of equity incentive income is a long-term incentive mechanism intended to motivate workers. In contrast, the legal essence of labor remuneration is the consideration paid by the employer for labor provided by the worker. There is a clear and distinct difference in nature between the two.

3. Equity incentive targets are difficult to directly quantify into monetary amounts. If this article links equity incentive targets with labor remuneration, it may create obstacles to calculating the average wage for the twelve months prior to resignation.

Current social practice does not support equating equity incentive targets with labor remuneration through legislation. Moreover, equity incentive targets are often difficult to directly quantify into monetary amounts, while the calculation of economic compensation and damages for illegal termination of labor contracts both require the average wage of the 12 months prior to resignation as a basis. If equity incentive targets are treated as a component of labor remuneration, it may cause difficulties in calculating economic compensation and damages. The author believes that the wording “employer distributes labor remuneration to workers through equity incentives based on an employment relationship” should be deleted to ensure adequate application scope for this article and to reduce judicial system confusion and practical difficulties caused by it.

II. In current practice, some equity incentive methods involve multi-party legal relationships, and the obligor for delivering the target may not necessarily be the employer. Subject to the principle of privity of obligation, the application conditions of this article should be emphasized as limited to equity incentive forms where the employer directly distributes its own equity to workers.

In current practice, there exist various forms of equity incentive implementation, including direct employee shareholding (the incentive recipient directly acquires and holds the employer’s equity according to the agreement), indirect employee shareholding (the incentive recipient acquires equity of the employer’s shareholders or establishes an equity nominee holding relationship with the employer’s shareholders according to the agreement), and virtual equity shareholding (the incentive recipient acquires deemed dividend rights according to the agreement). Under the indirect employee shareholding structure, the basis for the employee’s right to obtain the equity incentive target or its corresponding monetary benefits stems from the employee’s claim against a third party and has no direct legal connection with the employer, making this article inapplicable. To avoid confusion in legal application, it seems appropriate to clarify that the scope of this article is limited to direct employee shareholding situations where “the employer and the worker agree to allocate the employer’s own equity to the worker as an incentive.”

III. The phrase “disputes arising from the exercise of equity rights” is ambiguous and should be directly clarified as “exercise of shareholder rights.”

As noted in point II, under the virtual equity shareholding model in practice, employees do not actually acquire the status of shareholders of the employer but only obtain deemed “dividend rights” according to the agreement. The author believes that claims by employees requesting the exercise of “virtual equity rights” to obtain dividend payments according to the agreement should still fall within the scope of labor disputes. The exclusionary wording “exercise of equity rights” in the original text may result in such claims, which should be labor disputes, being inadmissible, seemingly contrary to the original intent of this article. As for the direct employee shareholding model, claims by employees based on their shareholder status to register and declare shareholder status, request participation in decision-making, or request shareholder dividends belong to other types of legal relationships and should be handled according to relevant provisions of the Company Law. In summary, it is recommended to revise “except for disputes arising from the exercise of equity rights” to “except for disputes arising from the exercise of shareholder rights by the worker after obtaining the incentive target equity,” further clarifying the scope of exclusion under this article.

II. Article 6 of the Draft oversteps the nature of the service contract relationship between re-employed retirees and their employing units, posing risks of encroaching upon the private law domain. The existing legal system already provides avenues for addressing the labor protection and accountability issues concerning re-employed retirees addressed in this article, making this provision unnecessary. It is recommended to delete this article or substantially revise it.

Original text:

VI. [Protection of Rights and Interests of Workers Who Have Reached the Statutory Retirement Age but Have Not Yet Enjoyed Basic Pension Insurance Benefits] Where a worker who has reached the statutory retirement age but has not yet enjoyed basic pension insurance benefits provides labor to an employer, and the worker requests that disputes concerning labor remuneration, working hours, rest and leave, labor protection, occupational hazard prevention, and work-related injury insurance benefits be handled by reference to labor laws and regulations, the people’s court shall support such request.

Revision suggestion:

It is recommended to delete this article. Alternatively, revise it as:

VI. [Protection of Rights and Interests of Re-Employed Retirees]

Where a worker who has reached the statutory retirement age provides services to an employing unit, the employing unit shall, by reference to labor laws and regulations, provide labor protection and occupational hazard prevention for such worker and implement the working hours and rest and leave as prescribed by law. Where such worker claims damages against the employing unit on the grounds that the employing unit failed to provide labor protection or occupational hazard prevention according to law, or violated legal provisions on working hours and rest and leave, thereby causing harm to the worker, such dispute shall not be deemed a labor dispute, and the people’s court shall accept it as a tort liability dispute. Where the employing unit breaches the re-employment agreement and the worker claims that the employing unit bear liability for breach of contract, the people’s court shall examine and handle the matter in accordance with the relevant provisions of the Civil Code of the People’s Republic of China.

Reasons for revision:

I. It would be more appropriate for the civil law to regulate the rights and obligations between re-employed retirees and employing units. This judicial interpretation may impose statutory obligations on employing units to provide, by reference to labor laws, labor protection and ensure rest rights for re-employed retirees. However, the legal liability for improper performance of such obligations should be handled by the people’s court in accordance with the relevant provisions of the Civil Code of the People’s Republic of China, rather than being accepted as labor disputes or adjudicated based on labor laws.

As stated above, the relationship between employing units and re-employed retirees constitutes a service contract relationship in the private law domain, which should be governed by the Civil Code of the People’s Republic of China rather than labor laws and regulations. If labor laws excessively encroach upon this domain, the liability of employing units under the re-employment legal relationship would become unpredictable. For example: Does “handling rest and leave by reference to labor laws and regulations” mean re-employed retirees can also enjoy paid annual leave or 300% annual leave wages under the “Regulations on Paid Annual Leave for Employees”? Does “handling labor protection by reference to labor laws and regulations” mean re-employed retirees can exercise the right to constructive dismissal under Article 38 of the Labor Contract Law and claim economic compensation from the employing unit when the employing unit fails to provide labor protection according to law? Does “handling labor remuneration by reference to labor laws and regulations” mean re-employed retirees can claim, under specific circumstances, additional compensation at a rate of not less than 50% and not more than 100% of the payable amount under Article 85 of the Labor Contract Law? Such questions may lead to legal system confusion and obstacles in judicial practice, making it difficult for employing units to accurately identify legal risks when deciding to re-employ retirees, further reducing the willingness of employing units to hire retired persons, which objectively hinders the re-employment of retired persons.

Therefore, the author believes that the rights and obligations between re-employed retirees and their employing units should fully respect the parties’ autonomy of will, and relevant disputes should be adjudicated by the people’s court based on the relevant provisions of the Civil Code’s Contract Book and Tort Liability Book, rather than being tried by the people’s court based on labor laws and regulations. From this perspective, Article 6 of the Draft seems appropriate for deletion.

Even if not deleted, Article 6 of the Draft should be substantially revised. First, given that no labor relationship exists between re-employed retirees and employing units, this article should avoid using terms with labor relationship characteristics such as “worker” and “employer,” and should instead use “service provider” and “service recipient” to indicate the distinction. Second, Article 6 of the Draft should be scaled back to a “declaratory obligation” provision, i.e., only clarifying that under the re-employment relationship, the employing unit still has the legal obligation to safeguard the basic labor rights and interests of workers by reference to labor laws. However, the evaluation of legal liability arising from non-performance of such obligations should distinguish between tort damages claims and breach of contract damages claims based on differences in the parties’ claims and be handled by other corresponding laws.

Regarding the handling of work-related injuries for re-employed retirees, existing provisions such as the “Reply on Whether Injured or Deceased Migrant Workers Exceeding the Statutory Retirement Age Can Be Recognized as Work-Related Injuries” ([2012] Xing Ta Zi No. 13) and the “Opinions of the Ministry of Human Resources and Social Security on Several Issues Concerning the Implementation of the Regulations on Work-Related Injury Insurance (II)” (Ministry of Human Resources and Social Security Document [2016] No. 29) already provide written rules, and Article 6 of the Draft need not elaborate further.

II. Upon reaching the statutory retirement age, the labor relationship terminates. Regardless of whether such persons who have reached the statutory retirement age are already enjoying basic pension insurance benefits, the relationship between them and the employing unit does not constitute a labor relationship but rather a service contract relationship. This judicial interpretation article itself does not need to distinguish whether such re-employed retirees are already enjoying basic pension insurance benefits.

Article 44 of the Labor Contract Law provides six circumstances for the termination of labor contracts, of which item (2) states: “where a worker begins to enjoy basic pension insurance benefits according to law, the labor contract terminates.” Item (6) states: “where other circumstances as prescribed by laws and administrative regulations occur, the labor contract terminates.” Article 21 of the “Regulations on the Implementation of the Labor Contract Law” provides that when a worker reaches the statutory retirement age, the labor contract terminates. Therefore, combining the authorization of Article 44(6) of the Labor Contract Law and the specific provisions of Article 21 of the “Regulations on the Implementation of the Labor Contract Law,” after reaching the statutory retirement age, the labor relationship terminates. At this time, no labor relationship exists between re-employed retirees and their employing units, but rather a service contract relationship exists, which should be governed by the Civil Code of the People’s Republic of China, and labor laws no longer apply.

In the author’s view, the legislative intent of this article is to ensure that re-employed retirees can equally receive appropriate labor protection by reference to labor laws. Therefore, even if this judicial interpretation article is deemed worthy of retention, it does not need to distinguish whether the re-employed retiree is already enjoying basic pension insurance benefits.

III. The essence of Article 7 of the Draft is not to create a fictional labor relationship but to determine the entity bearing employer responsibility toward workers in cases of illegal subcontracting. It is recommended to adjust the summary of this article.

Original text:

Article 7 [Labor Relationship in Subcontracting] Where a contractor with employer qualifications subcontracts or sub-subcontracts contracted business to an organization or individual without employer qualifications, and a worker hired by such organization or individual requests confirmation that the contractor is the entity bearing employer responsibility and shall assume employer responsibilities such as paying wages and providing work-related injury insurance benefits, the people’s court shall support such request.

Revision suggestion:

Article 7 [Entity Bearing Employer Responsibility for Subcontracting] Where a contractor with employer qualifications subcontracts or sub-subcontracts contracted business to an organization or individual without employer qualifications, and a worker hired by such organization or individual requests confirmation that the contractor is the entity bearing employer responsibility and shall assume employer responsibilities such as paying wages and providing work-related injury insurance benefits, the people’s court shall support such request.

Reasons for revision:

Generally, no mutual intent or fact exists to establish and maintain a labor relationship between workers hired by organizations or individuals without employer qualifications that have accepted illegal subcontracts and the upstream contractor with employer qualifications. Neither does this article intend to create a fictional labor relationship between such workers and the upstream contractor with employer qualifications. It merely clarifies that the upstream contractor with employer qualifications directly bears employer responsibilities such as paying wages and providing work-related injury insurance benefits to such workers—essentially a pass-through of responsibility rather than a pass-through of labor relationship. To accurately reflect the gist of this article, it is recommended to revise the summary to “[Entity Bearing Employer Responsibility for Subcontracting]”

IV. The essence of Article 8 of the Draft is not to create a fictional labor relationship but to determine the entity bearing employer responsibility for workers hired by affiliated entities. It is recommended to adjust the summary of this article. Consideration should be given to situations where an affiliated entity simultaneously affiliates with multiple entities to conduct business externally.

Original text:

Article 8 [Labor Relationship of the Affiliated Entity] Where an organization or individual without employer qualifications affiliates with another entity to conduct business externally, and a worker hired by such organization or individual requests confirmation that the affiliated entity is the entity bearing employer responsibility and shall assume employer responsibilities such as paying wages and providing work-related injury insurance benefits, the people’s court shall support such request.

Revision suggestion:

Article 8 [Employer Responsibility of the Affiliated Entity] Where an organization or individual without employer qualifications affiliates with another entity to conduct business externally, and a worker hired by such organization or individual requests confirmation that the affiliated entity is the entity bearing employer responsibility and shall assume employer responsibilities such as paying wages and providing work-related injury insurance benefits, the people’s court shall support such request.

Where multiple affiliated entities are simultaneously involved, the people’s court may, based on factors such as employment management conduct, working time, work content, and the parties’ intentions, designate one affiliated entity with the closest connection as the entity bearing employer responsibility.

Reasons for revision:

I. The original intent of this article is not to create a fictional labor relationship but to clarify the entity bearing employer responsibility for workers hired by the affiliate, which is essentially a pass-through of responsibility rather than a pass-through of labor relationship. The summary of this article is inappropriate and should be revised.

Generally, no mutual intent or fact exists to establish and maintain a labor relationship between the affiliated entity and workers hired by the affiliate. Referring to revision suggestion III, to accurately reflect the gist of this article, it is recommended to revise the summary to “[Employer Responsibility of the Affiliated Entity]“

II. In practice, situations exist where an affiliate simultaneously affiliates with multiple entities and hires workers to conduct business for multiple entities simultaneously. This article may consider such situations and use the closest connection principle to designate one affiliated entity as the entity bearing employer responsibility.

In the course of the author’s legal services, a case was encountered: Company A is a freight company. Vehicle owner Lv Mou affiliated some of his trucks with Company A and the remaining trucks with other companies. Lv Mou hired driver Liu Mou to drive trucks and perform work arranged by Lv Mou. In reality, similar situations are not uncommon. Where an affiliate simultaneously affiliates with multiple entities, workers should not be directly excluded from the right to assert claims against all such entities simultaneously, and this situation should be distinguished from the principle for handling mixed employment. The author suggests clarifying in the judicial interpretation that the people’s court may, based on the worker’s personal wishes and the specifics of the labor provided, designate one affiliated entity as the entity bearing employer responsibility.

V. Article 20(II)(3) of the Draft provides that where a job transfer results in an obviously unreasonable reduction of the worker’s wages, this cannot be remedied through necessary assistance or compensation measures. The wording and parallel relationship of this item should be adjusted. The wording of item (4) “the worker is objectively unable to胜任 the job position after the transfer” is inappropriate. It should be clarified that only job transfers where the employer knowingly assigns an unsuitable position constitute illegal job transfers.

Original text:

Article 20 [Review Standard for Unilateral Job Transfer and Location Change by Employer] Where a labor dispute arises due to the employer’s unilateral adjustment of the worker’s job position or work location, the employer bears the burden of proof for the legality of the adjustment.

Where a worker claims that the adjustment of job position or work location is illegal, and any of the following circumstances exists, the people’s court shall so find:

(1) It does not conform to the labor contract stipulations or the employer’s rules and regulations;

(2) It is not necessitated by the employer’s production and operation needs;

(3) The worker’s wages and other labor conditions are adversely changed, and the employer has not provided necessary assistance or compensation measures;

(4) The worker is objectively unable to胜任 the job position after the transfer;

(5) Discriminatory, insulting, or other similar circumstances exist;

(6) It violates laws, administrative regulations, or other provisions.

Where the employer illegally adjusts the job position or work location, and the worker requests rescission of the labor contract and payment of economic compensation on the ground that the employer fails to provide labor conditions, the people’s court shall support such request.

Revision suggestion:

Article 20 [Review Standard for Unilateral Job Transfer and Location Change by Employer] Where a labor dispute arises due to the employer’s unilateral adjustment of the worker’s job position or work location, the employer bears the burden of proof for the legality of the adjustment.

Where a worker claims that the adjustment of job position or work location is illegal, and any of the following circumstances exists, the people’s court shall so find:

(1) It does not conform to the labor contract stipulations or the employer’s rules and regulations;

(2) It is not necessitated by the employer’s production and operation needs;

(3) The worker’s wages are unreasonably and obviously reduced, or other labor conditions are adversely changed and the employer has not provided necessary assistance or compensation measures;

(4) The employer knew or should have known in advance that the worker is objectively unable to胜任 the job position after the transfer;

(5) Discriminatory, insulting, or other similar circumstances exist;

(6) It violates laws, administrative regulations, or other provisions.

Where the employer illegally adjusts the job position or work location, and the worker requests rescission of the labor contract and payment of economic compensation on the ground that the employer fails to provide labor conditions, the people’s court shall support such request.

Reasons for revision:

I. A significant reduction in wages due to a job transfer is fundamentally different from changes in labor conditions such as commuting distance or work environment, and such reduction is difficult to remedy through the employer’s necessary assistance or compensation measures. The parallel relationship in item (3) of this paragraph should be adjusted to reflect this distinction.

In existing judicial practice, where an employer exercises its autonomous employment right to unilaterally transfer a worker, resulting in longer commuting distances or changes in the work and living environment, the resulting inconvenience can be balanced through measures such as providing transportation subsidies or dormitories, generally maintaining fairness between the parties. However, a significant reduction in wages due to a job transfer clearly cannot be remedied by similar means to compensate for the worker’s losses. Therefore, the original item (3) appears to inappropriately group together different matters. It is recommended to revise it to “the worker’s wages are unreasonably and obviously reduced, or other labor conditions are adversely changed and the employer has not provided necessary assistance or compensation measures” to distinguish and reflect the critical nature and irreparability of wage income compared to other labor conditions.

II. Legislation and judicial practice should not take a “one-size-fits-all” approach to wage reduction caused by job transfers. Instead, the reasonableness of wages after transfer should be comprehensively assessed based on changes in job responsibilities, workload, work difficulty, and working hours resulting from the transfer, balancing the protection of workers’ rights and interests with the employer’s autonomous employment right. This article should clarify that only when a job transfer causes an unreasonable and obvious reduction in the worker’s wages can it be deemed a condition for finding an illegal job transfer.

Employers have the right to set different position wage standards or wage systems through their lawfully established rules and regulations, which is an important manifestation of the employer’s autonomous employment right. Job transfers often imply changes in job responsibilities, workload, work difficulty, and working hours. The essence of wages is the consideration paid by the employer for labor provided by the worker. From the principle of reciprocity of rights and obligations, it is unobjectionable and not contrary to law for an employer to appropriately reduce wages to match the requirements of the worker’s new position based on lawfully established position wage standards and compensation plans, where the worker’s overall contribution decreases after the transfer. To avoid controversy in the application of Article 20(II)(3) in judicial practice, it is recommended to clarify that only when a job transfer results in a reduction of the worker’s wages that is both unreasonable (not matching the requirements of the new position) and obvious (lacking basis in rules and regulations) should it be deemed a circumstance of illegal job transfer.

III. For employers, job transfers are often attempts to optimize human resource allocation and reform business structures. In fact, before a job transfer is completed and implemented for a period, it is difficult for the employer to be certain that the worker is objectively able to胜任 the adjusted position. The wording of Article 20(II)(4) should be adjusted to avoid ambiguity, clarifying that the scope of this item is limited to cases of malicious job transfers where the employer deliberately assigns a mismatched position.

Where an employer, after a job transfer based on normal production and operation needs, discovers that the worker cannot胜任 the new position, this constitutes a legitimate attempt by both parties, and even if the result is unfavorable, it cannot be deemed an illegal job transfer. Of course, in practice, there are indeed cases where employers violate the principle of good faith, deliberately transferring workers to positions that fundamentally do not match their abilities, thereby forcing workers to resign voluntarily. The author believes that the purpose of Article 20(II)(4) is mainly to regulate the latter type of conduct where employers impose difficult conditions on employees through mismatched job transfers. The existing wording of this judicial interpretation does not adequately limit its scope, creating a risk of misunderstanding that the law “infers intent from consequences.” It is recommended to add the qualifying condition “the employer knew or should have known in advance.”

VI. Given the current imbalance and inadequacy of China’s socio-economic development, many workers in practice (especially migrant workers) actively request not to purchase social insurance in exchange for higher cash wages. Article 23(II) of the Draft may be too detached from social reality, indirectly restricting some workers’ freedom of choice and potentially causing an imbalance in rights and obligations between labor and management, which may objectively hinder employment promotion. It is recommended to revise.

Original text:

Article 23 [Liability for Failure to Pay Social Insurance Premiums According to Law] An agreement between an employer and a worker not to pay social insurance premiums is invalid.

Where a worker agrees with the employer not to pay social insurance premiums, and the worker subsequently requests payment of economic compensation on the ground that the employer failed to pay social insurance premiums according to law, the people’s court shall support such request.

Where the employer pays social insurance premiums retroactively and requests the worker to return the social insurance compensation already paid, the people’s court shall support such request.

Revision suggestion:

Article 23 [Liability for Failure to Pay Social Insurance Premiums According to Law] An agreement between an employer and a worker not to pay social insurance premiums is invalid.

Where a worker agrees with the employer not to pay social insurance premiums, subsequently explicitly requests the employer to handle social insurance procedures and pay social insurance premiums for the worker, and the employer refuses to do so within a reasonable period, the worker rescinds the labor contract on this ground and requests the employer to pay economic compensation, such request shall be supported.

Where the employer pays social insurance premiums retroactively and requests the worker to return the social insurance compensation already paid, the people’s court shall support such request.

Reasons for revision:

Paying social insurance premiums for workers according to law is an undeniable statutory obligation of employers. However, we should also note the current social reality that most cross-regional migrant workers, primarily农民工 and manual laborers, often hope or even request that employers not purchase social insurance, converting social insurance premiums into take-home wages to increase income levels. Labor legislation and judicial practice should adapt to and match social practice and the current state of the country’s economic and social development. If the judicial interpretation clarifies that workers can renege on an agreement not to purchase insurance and directly demand economic compensation from the employer, then employers face severe legal risks when confronted with such workers’ requests not to purchase insurance. This would prevent such migrant workers and manual laborers from obtaining satisfactory wages and negatively affect the employment prospects of this population, objectively hindering the implementation of the national employment promotion plan. At the same time, the existing paragraph (2) may give rise to new forms of “professional litigation triggering,” detrimental to the healthy development of China’s economy and society.

To fully reflect the倾斜 protection of workers, labor laws should not only safeguard workers’ substantive rights but also fully respect workers’ freedom to make their own choices, while taking into account employers’ employment risks. Based on social reality, it is recommended to adjust this paragraph so that employers only face the legal liability of paying economic compensation when a related worker changes their mind and requests insurance but the employer fails to cooperate actively. It should also be clarified that payment of economic compensation is the legal consequence when a worker exercises the right to constructive rescission based on the employer’s failure to pay social insurance premiums according to law. The original text fails to emphasize the precondition of rescinding the labor contract, making it problematic to directly stipulate the liability for paying economic compensation. Referring to Article 25 of the “Summary of Symposium on Several Issues Concerning the Trial of Labor and Personnel Dispute Cases by Guangdong Provincial High People’s Court and Guangdong Provincial Labor and Personnel Dispute Arbitration Committee” (Yue Gao Fa [2012] No. 284, now invalid but still an important reference), the author recommends revising paragraph (2) to: “Where a worker agrees with the employer not to pay social insurance premiums, subsequently explicitly requests the employer to handle social insurance procedures and pay social insurance premiums for the worker, and the employer refuses to do so within a reasonable period, the worker rescinds the labor contract on this ground and requests the employer to pay economic compensation, such request shall be supported.”

VII. In existing judicial practice, most courts consider that labor relations have a personal attribute, and as long as the employer explicitly expresses its不同意 to continue performance, the labor contract is deemed incapable of continued performance. The phrase “the labor contract may continue to be performed” in Article 25 of the Draft should be further narrowed to exclude this subjective obstacle based on party intent, ensuring sufficient and clear application scope for this article.

Original text:

Article 25 [Wages During the Arbitration or Litigation Period] Where an employer’s decision to rescind or terminate a labor contract is found to be illegal, and the labor contract may continue to be performed, and the worker requests the employer to pay wages for the period from the date of such decision until the arbitration or litigation period, the employer shall pay wages for such period to the worker at the wage standard applicable when the worker provided normal labor. Where both parties are at fault, they shall each bear corresponding responsibility.

The people’s court may comprehensively determine the degree of fault of the employer and the worker based on factors such as the worker’s delay in applying for arbitration and initiating litigation, and the worker providing labor to other employers during the dispute period.

Revision suggestion:

Article 25 [Wages During the Arbitration or Litigation Period] Where an employer’s decision to rescind or terminate a labor contract is found to be illegal, and there are no objective obstacles to the continued performance of the labor contract, and the worker requests the employer to pay wages for the period from the date of such decision until the arbitration or litigation period, the employer shall pay wages for such period to the worker at the wage standard applicable when the worker provided normal labor. Where both parties are at fault, they shall each bear corresponding responsibility.

The people’s court may comprehensively determine the degree of fault of the employer and the worker based on factors such as the worker’s delay in applying for arbitration and initiating litigation, and the worker providing labor to other employers during the dispute period.

Reasons for revision:

In existing judicial practice, it is generally believed that labor contracts have a significant personal attribute. Whether the contract can continue to be performed depends not only on the objective material possibility of performance but also on the intentions of both parties and their mutual trust basis. If the employer explicitly expresses its不同意 to continue performance of the labor contract, most courts generally find that the labor contract cannot continue to be performed. For example, Beijing No.1 Intermediate People’s Court (2020) Jing 01 Min Zhong No. 7960 Civil Judgment: “In a labor relationship, labor is a special commodity with both personal and social attributes. The labor relationship between a worker and an employer is not merely an economic exchange relationship but also encompasses trust and cooperation. Regarding the continuation of the labor relationship, if one or both parties have lost the basis of trust, the labor relationship has objectively lost the necessity for continued performance.” Similarly, Guangzhou Intermediate People’s Court (2023) Yue 01 Min Zhong No. 12312, 12313 Civil Judgment: “Given that Haijixing Company expressed its不同意 to continue performance of the labor contract at both first instance and second instance trials. Considering that labor relations have a personal attribute and require mutual trust as a basis, and Haijixing Company does not同意 to continue performance, the mutual trust basis for continued performance of the labor contract is lacking.” Further, Beijing No.1 Intermediate People’s Court (2020) Jing 01 Min Zhong No. 7296 Civil Judgment: “Since Tianan Life Insurance Company lacks the subjective willingness to continue performance of the labor contract, considering that labor relations are legal relationships combining personal subordination and property dependency, and building and developing harmonious and stable labor relations is an important goal of China’s labor legislation, upon careful consideration of the existing circumstances and balancing of interests, this court finds that the parties’ labor contract has objectively lost the basis for continued performance.”

The author agrees with the tendency of the above-mentioned judicial practice. However, the author believes that “the employer’s lack of willingness to continue performance” is a subjective obstacle to continued performance, which should be distinguished from other objective material factors that prevent the continued performance of a labor contract. The original intent of this article is to further safeguard workers’ rights and remedies in cases of illegal termination. The subjective obstacle to continued performance of a labor contract should not serve as a condition for the employer to exempt itself from liability for paying wages from the date of the illegal termination decision until the arbitration or litigation period. The original wording “and the labor contract may continue to be performed” fails to adequately consider the distinction between subjective and objective obstacles, which may prevent this article from fully achieving its legislative purpose, narrow the application scope of this provision, and inadequately protect workers’ lawful rights and interests.

Based on the above, the author recommends revising this article to: “Where an employer’s decision to rescind or terminate a labor contract is found to be illegal, and there are no objective obstacles to the continued performance of the labor contract, and the worker requests the employer to pay wages for the period from the date of such decision until the arbitration or litigation period, the employer shall pay wages for such period to the worker at the wage standard applicable when the worker provided normal labor. Where both parties are at fault, they shall each bear corresponding responsibility.”